Scientific Games confirms $6bn cash sale of lottery division

Scientific Games Corporation (SGC) has announced this morning that it will sell its SG Lottery unit to Brookfield Business Partners and its institutional partners for a total sum of $6.05 billion. 

The consideration will consist of $5.825 billion in cash and an earn-out of up to $225 million dependent on the achievement of specified EBITDA targets in 2022 and 2023.

A potential buyout of Scientific Games’ lottery operations has been in the pipeline for some time, with the company disclosing in June that it would pursue a ‘strategic divestment’ of its sports betting and lottery units in order to reduce its long-term debt – which currently stands at around $9.5 billion.

Bloomberg reported earlier this week that Brookfield Asset Management was one of two international investment companies, alongside Apollo Global Management, interested in acquiring SG Lottery.

“This transaction is transformative in accelerating the delivery of our stated strategy to optimise our portfolio, aggressively de-lever our balance sheet and position us to invest in future growth,” said Barry Cottle, President and CEO of Scientific Games. 

“We conducted a thorough review of paths to divest the Lottery business and we are confident that this transaction maximises value and certainty while minimising complexity and execution risk, and positions both Scientific Games and SG Lottery for continued success along their unique growth trajectories.

“The significant near-term proceeds from this transaction as well as our previously announced sale of Sports Betting will transform our balance sheet and provide the financial flexibility to invest organically and inorganically to accelerate our strategies. This marks a major milestone and puts us on a clear path to achieve our vision to become the leading cross-platform global game company and unlock our full value for shareholders.”

By acquiring SG Lottery, Brookfield will integrate a subsidiary which maintains partnerships with ‘approximately 130 government and non-government lottery entities in over 50 countries’, providing turn-key solutions including instant and terminal-generated lottery games, sports betting, lottery systems, retail technology and iLottery offerings.

David Nowak, Managing Partner, Brookfield Business Partners, added: “The Scientific Games Lottery team has built a leading business, which has innovated its industry, at the convergence of games, technology and services, across retail and digital channels for its global customers. 

“With our capabilities and global reach, we look forward to supporting management in the continued growth of the business.”

Scientific Games decision to sell its lottery and sports betting divisions has received the support of the company’s board, including Executive Vice Chair Toni Korsanos and Executive Chairman Jamie Odell, the latter of whom has stated that his role is to make drastic decisions’ in order to reduce the company’s debt.

Deal makers have entered into a transitional services agreement, whereby Scientific Games Corporation will provide SG Lottery certain finance, information technology, regulatory compliance, legal, human resources and facilities at cost for an initial term of 12 months.

“We are thrilled with this outcome and what it means for the future of Scientific Games Lottery and our customers,” remarked Patrick McHugh, Chief Executive of Scientific Games Lottery.

“I am confident that, with Brookfield’s support, we will have the flexibility and agility to expand our deep product portfolio to meet our customers’ evolving needs and maximize lottery beneficiary proceeds across the globe, enabling us to capture the significant opportunities we see ahead.”

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